HelpFINRA Manual: Contents
FINRA Manual
Corporate Organization Notices
1992
92-65 SEC Approval of Amendments Concerning the Exclusion of Class-Action Matters From Arbitration Proceedings and Requiring That Predispute Arbitration Agreements Include a Notice That Class-Action Matters May Not Be Arbitrated
92-59 SEC Approval of Amendments Requiring Prefiling of Advertisements for Collateralized Mortgage Obligations
92-58 SEC Approval of Amendment to Section 13, Schedule E to the NASD By-Laws Effective October 1, 1992
92-57 Proposed Amendments to Schedule E to the NASD By-Laws Regarding Potential Conflicts of Interest; Last Voting Date: December 21, 1992
92-56 Proposed Recision of the Guidelines Regarding Communications With the Public About Investment Companies and Variable Contracts (Guidelines) and Proposed Amendments to Article III, Section 35 of the Rules of Fair Practice to Incorporate Items From
92-51 SEC Approval of Amendments Relating to "When, as and if Issued" and "When, As and if Distributed" Contracts; Effective November 2, 1992
92-50 Procedures Regarding Securities and Exchange Commission Rule 15c2-11 and Schedule H, Section 4 of the NASD® By-Laws
92-41 SEC Approval of Amendments to Article III, Section 26 of the NASD Rules of Fair Practice Regarding Limitations on Mutual Fund Asset-Based Sales Charges; Effective July 7, 1993
92-38 SEC Adoption of Penny-Stock Disclosure Rules Under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990
92-37 Proposed Amendment to Article III, Section 21 of the Rules of Fair Practice to Require Predispute Arbitration Agreements to Include a Notice That Class-Action Matters May Not Be Arbitrated; Last Voting Date: August 21, 1992
92-36 Proposed Amendment to Article III, Section 35 of the NASD's Rules of Fair Practice And Section 8 of the NASD's Government Securities Rules to Require Members to Prefile Advertisements for Collateralized Mortgage Obligations; Last Voting Date: Aug
92-32 Request for Comments on Proposed Amendment to the Rules of Fair Practice Relating to the Respective Obligations and Supervisory Responsibilities of Introducing and Clearing Firms; Last Date for Comments: July 22, 1992
92-31 SEC Approval of Amendments Relating to the Contingent Suspension of Members and Associated Persons
92-30 Proposed Amendment to Rules of Fair Practice to Require Members to Send Periodic Statements of Account to Customers; Last Voting Date: July 22, 1992
92-28 SEC Approval of Corporate Financing Rule and Code of Procedure for Corporate Financing and Direct Participation Program Matters
92-25 Proposed Amendment to Article III, Section 15 of the NASD Rules of Fair Practice Re: Exemption for Negative-Response Letters Used to Facilitate Certain Bulk Exchanges of Money Market Mutual Funds
92-20 Sale of Direct Participation Program Debt Instruments by Limited Principals and Representatives; SEC Approval of Amendments to Parts II and III of Schedule C To the NASD's By-Laws
92-19 Retention of Jurisdiction; SEC Approval of Amendments to Article III, Section 5 and Article IV, Sections 3 and 4 of the Association's By-Laws, and Article IV, Section V Of the Association's Rules of Fair Practice
92-18 SEC Approval of Amendments to the Definition of the Term "Branch Office" in Article III, Section 27 of the Rules of Fair Practice
92-17 Adoption of Amendments to Interpretation of the Board of Governors — Forwarding Of Proxy and Other Materials, Article III, Section 1 of the NASD Rules of Fair Practice Re: Forwarding Proxy Material on the Request of Stockholders
92-10 Approval of Amendments to Article III, Section 3 of the NASD By-Laws Regarding NASD Member Requirement to Appoint One Executive Representative Responsible For Voting and Acting for the Member in All Affairs Relating to the NASD
92-8 Proposed Amendment to Rules of Fair Practice, Article III, New Section 46: Short-Sale Rule for Nasdaq/NMS Securities and New Section 47: Primary Nasdaq Market Makers; Last Voting Date: March 13, 1992
92-4 Revision to the Investment Company Products/Variable Contracts Limited Principal Examination (Series 26)
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92-18 SEC Approval of Amendments to the Definition of the Term "Branch Office" in Article III, Section 27 of the Rules of Fair Practice
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EXECUTIVE SUMMARY
On March 24, 1992, the Securities and Exchange Commission (SEC) approved amendments to Article III, Section 27(g) of the Rules of Fair Practice codifying certain interpretations of the term "branch office." The amendments will become effective April 30, 1992. The text of the amendments follows the discussion below.
BACKGROUND AND DESCRIPTION OF AMENDMENTS
On March 24, 1992, the SEC approved amendments to the NASD's supervision rule in Article III, Section 27 of the Rules of Fair Practice regarding the definition of the term "branch office" in Subsection 27(g). The amendments codify interpretations of the term that have been applied to the activities of certain members in the last few years.
In 1989, in response to requests from members, a committee of the Board of Governors ("Board") issued several interpretations under Article III, Section 27(g)(2) of the NASD Rules of Fair Practice to clarify the rule's definition of branch office and the exemptions from branch-office registration available for nonbranch business locations that meet certain conditions under the rule. These interpretations were reviewed by the Board in November 1989 and were approved for publication in the NASD Regulatory & Compliance Alert (February 1990). The interpretations were relied on for more than a year and were found to be workable in practice. Consequently, the NASD decided to codify the terms of the interpretations.
Under the current language of Article III, Section 27(g) of the Rules of Fair Practice, a location could be exempt from registration as a branch office if it was identified to the public only in telephone-book listings, on business cards, or on stationery, that also included the address and telephone number of the branch office or the office of supervisory jurisdiction (OSJ) responsible for supervising the nonbranch business location. Under new Subsection (g)(2)(ii) to Article III, Section 27, a location is also exempt from registration if the member's advertisement includes a local telephone number and/or a local post-office box so long as the advertisement also identifies the location and telephone number of the appropriate supervising branch office or OSJ. The advertisement may not, however, include the address of the nonbranch location. In addition, under new Subsection (g)(2)(iii), a member's sales literature may also include the local address of a nonbranch business location, so long as the location and telephone number of the appropriate supervisory branch office or OSJ of the member is identified.
New Subsection (g)(3) allows a member to use the firm's main-office address and telephone number on sales literature, advertisements, business cards, and business stationery instead of the address and telephone number of the supervisory branch office or OSJ so long as the member can demonstrate that it maintains a significant and geographically dispersed supervisory system appropriate to its business. Moreover, any complaints received by the main office must be forwarded to the office or offices with jurisdiction over the non-branch business location.
The new exemptions from the branch-office definition in Article III, Section 27(g)(2) are intended as a reasonable accommodation to member firms with widely dispersed sales personnel selling limited product lines such as variable contracts and mutual funds. Any office location that (i) performs any function of an OSJ, (ii) publicly displays sign-age, (iii) operates from public areas of buildings, such as bank branches, even when such locations are temporarily staffed, or (iv) advertises an address in any public media would still be required to register as a branch office. Such locations hold themselves out to the public as being places where the member conducts a securities business and, thus, come within the definition of a branch office. The NASD will not, however, regard a listing in a lobby directory or a sign on an interior corridor door as holding the location out to the public in such a way as to require branch-office registration unless other indicia of the location's status as a branch office are present.
Article III, Section 27 and the exclusions in the amendments are designed to avoid requiring the registration of locations as branch offices unless their securities activity would require the continuous direct supervision of a principal (i.e., OSJ-type activity) or the location is being held out to the public as a place where the full range of securities activity is being conducted (requiring supervisory oversight of the initial interactions between customers and the member).
Questions regarding this notice may be directed to R. Clark Hooper, Director, Advertising Department, at (202) 728-8330; P. William Hotchkiss, Director, Surveillance Department, at (202) 728-8221; and Elliott R. Curzon, General Counsel's Office, at (202) 728-8451.
Article III of the NASD Rules of Fair Practice
(Note: New language is underlined; deleted language is in brackets.)
Supervision
Sec. 27.
Definitions
